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Real productivity of European countries

The value of all final goods and services produced within a country in a year is its GDP. The GDP per capita indicates the average share of the economy per person, if every single individual (from babies to the elderly) was working. Naturally this never happens, and salaries are never equal, although some countries have narrower gaps than others (see Gini coefficient). A more accurate "average" of the income in a country can be obtained by dividing the GDP per capita by the employment rate (see Employment vs unemployment rates in the EU).

For example, in 2005, Denmark had a GDP per capita (PPP) of US$ 34,740. Divided by 75.9% of the people in employment, each worker produces an average of US$ 46,381. If we now take Belgium, which has a much lower employment rate, we obtain : 31,244 / 61.1 x 100 = US$ 51,135. This means that the productivity per worker is higher in Belgium than in Denmark, in spite of Denmark's higher GDP per capita.

If we further divide by the average number of hours worked in the country, we get the productivity per worker per hour. Another way to calculate it is to take the GDP (PPP) per capita per hour and divide it by the employment rate, which should give exactly the same result, if the stats used are the same.

This means that French workers are, for example, 50% more productive than their British counterparts. The similarity of the results for culturally similar countries (e.g. Nordic countries, Spain & Portugal, France, Belgium and Luxembourg) demonstrate that they are probably a trustworthy indicator of the productivity across cultures.

So why do France and Belgium have similar GDP per capita to less productive countries like the UK, Germany or the Netherlands ? This can be explained by the very high percentage of fairly recent (last 3 generations) immigrants from developing countries, who are usually poorly educated an have much higher unemployment rates.

For instance, some immigrant districts of Brussels have official unemployment rates of 50% (but we know that the unofficial rate is always much higher, once we remove students, housewives, incapacitated people, etc.). So these people hardly contribute at all to the official economy represented by the GDP. Dividing the GDP per capita per hour by the employment rate effectively wipes out all the unemployed immigrants from the statistics, which make up maybe half of the 38.9% of Belgian residents not officially working.

In comparison, foreign residents in the UK tend to be much better educated, as the UK has attracts more intellectual job-seekers (in IT, finance, and even medicine), as well as more skilled workers (e.g. from Eastern Europe). It is not a new phenomenon; many Indian immigrants in the 1950's were medical doctors or lawyers. The only close equivalent to France and Belgium's Maghreban and Black African immigrants in the UK are the Pakistani immigrants who arrived in the 70's.

Both France and Belgium count about 10% of foreigners on their soil, but this does not include a significant percentage of naturalised immigrants, especially in France where half of the Muslims have already been naturalised. People of families having immigrated to France after WWII could possibly top 20% of the total population, with maybe 2/3 of them belonging to the poorly educated, badly paid or unemployed.

I do not believe that governments have (or at least publicly share) statistics about the average salary by ethnicity or nationality, but it wouldn't be completely absurd to believe that the gross income of French and Belgian nationals of European descent (so without naturalised immigrants) is considerably higher than that of other non-immigrant Europeans. So if we were to "hide/remove" all foreigners and people of non-European descent in Europe, the GDP per capita in France would probably be in the top 3, as opposed to 15th now.

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"What is the use of living, if it be not to strive for noble causes and to make this muddled world a better place for those who will live in it after we are gone?", Winston Churchill.

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"What is the use of living, if it be not to strive for noble causes and to make this muddled world a better place for those who will live in it after we are gone?", Winston Churchill.

High Productivity among EU countries

I have a question regarding the high productivity among the European countries. I would like to know why Belgium and Luxembourg are particularly high. Belgium has ratings of 110 in GDP per hour worked, Luxembourg 121 per hour worked and Norway 122 per hour worked. These are statistics according to the OECD Productivity Database Sept. 2006. This high output per worker must be attributed to differences in institutions and government policies - social infrastructure. Could anyone shed light on this?
Kind regards,
Jamie

Groningen and Hamburg skip away from the top because more people were employed (though working less) for the same GDP generated.

What is certain from these stats is that Ireland, and especially Dublin, has managed to make its way to the top of Europe's money spinners. Ireland now has the second highest GDP per capita in the EU after Luxembourg. Although Inner London, Paris, Brussels and Luxembourg all have higher GDP per capita than Dublin, the latter can now pride itself on its amazing productivity.

At a national level, Belgian workers are at the top of the list, with a productivity 28.5% higher than the European average.

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"What is the use of living, if it be not to strive for noble causes and to make this muddled world a better place for those who will live in it after we are gone?", Winston Churchill.

macimo, there is a very simple explanation for the difference on productivity between france , belgium and other countries.

The answer is discrimination, in france, the people who have the productive jobs, are mainly from the "grandes ecoles" and these people don't let outsiders get into the job market. Thus they have to work much more to compensate for the low employement rate.

Germany, uk, sweden, norway have a lot of foreigners residents and they don't have this productivity problem, because they try to provide jobs for everyone, and the job productivity is share between the workers. The situation is even better in the usa where the job market is less and less based in discrimination and really offers opportunities for everyone, this makes usa a wealthier nation.

So you see that if we base on my interpretation, the high productivity is a bad sign in an economy. The "weak economies" that don't provide opportunities for everyone have high productivities and the "strong economies" that provide jobs for everyone have a lower productivity.

If france stops discrimination, then there will be jobs for everyone, there will be a higher working rate, and the productivity will decrease (to become reasonable), and the country will be whealthier.

macimo, there is a very simple explanation for the difference on productivity between france , belgium and other countries.

The answer is discrimination, in france, the people who have the productive jobs, are mainly from the "grandes ecoles" and these people don't let outsiders get into the job market. Thus they have to work much more to compensate for the low employement rate.

It is true that graduates from the "grandes ecoles" take most of the good jobs in public companies, public administration and politcs. But they only account for a tiny percentage of the working population (probably less than 0.1%). I don't think that we can really say that they are the ones doing all the work in France.

Furthermore, this system does not exist in Belgium, and yet Belgium has a similar productivity. The only thing the two countries have in common is low employment and a lot of African (including Maghreban) immigrants.

So you see that if we base on my interpretation, the high productivity is a bad sign in an economy. The "weak economies" that don't provide opportunities for everyone have high productivities and the "strong economies" that provide jobs for everyone have a lower productivity.

So how do you explain that Ireland is the 4th most productive country ? It has a very strong economy and provides so many jobs to foreigners that it is in constant need of qualified immigrants. That's just the opposite of France, yet it has a high productivity too.

Countries with very low productivity are all poorer and underdeveloped. On a worldwide scale, the least productive countries are all in Africa. Within the EU, Romania and Bulgaria, the 2 poorest member states, are also the least productive. So I don't think that high productivity means "weak economy".

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"What is the use of living, if it be not to strive for noble causes and to make this muddled world a better place for those who will live in it after we are gone?", Winston Churchill.

The marginal product to labour is decreasing by the amount of labour - high employment will generally decrease GDP (PPP) per capita per hour.

Lets assume (not totally unrealistic) that high skilled workers are employed before low skilled workers, this means that countries with low unemployment (everything else being equal) will have a lower amount of human capital per worker, then a country with high unemployment.

Also not that france has a short work week compared to other countries (dont know about belgium), this could also be a factor to consider (decreasing marginal product per extra work hour).

Also, taxing could be a factor, with progressive taxing, you would expect high skilled workers to work relatively less, compared to countries with flat or regressive tax - thereby decreasing GDP (PPP) per capita per hour (scandinavia being the extreme case of progressive taxing).

Labour skill (human capital) can explain some of the differences among the countries.

Ireland i cannot explain.
A wild guess: low corporation taxes (12,5%) have attracted large corporations -> larger income variance and higher income in general.

Productivity per hour

You can not measure productivity in dollars/hour as it depends on how much money was the workers paid per hour. For example in South eastern Asian countries people would produce the same amount of goods in less hours then an european worker, yet they produce less dollars per hour because of the different rates of pay. In in Europe a worker will get paid say 100 euro per 8 hours work, in Asia he will get paid maybe only 5-10 euro per 10 hours work. It does not mean he/she is less productive. That is the nature of our world - where the wealth is concentrated and labour force availability and exploytations in this world. You should measure productivity not in monetary terms but in physical units per hour produced.

Good point solution, people in poor countries will make less money to produce same things as in developed country, even if the factory, technology, machines, tools are exactly the same.
The comparison Maciamo came up with works quite well comparing similarly developed countries. To be connected to same free market and using same money (Euro) makes it even more precise.
So what can we fix it for all countries? What physical units you're proposing?
To simplify it we would need to find 10 products, made in concerned countries with same technology and see the value difference in dollars. Granted that dollar exchange is free in these countries, otherwise the black market dollar value could be closer to the truth.
Toyota cars, Nike shoes, coca cola, etc, might be good indicators.

Good point solution, people in poor countries will make less money to produce same things as in developed country, even if the factory, technology, machines, tools are exactly the same.
The comparison Maciamo came up with works quite well comparing similarly developed countries. To be connected to same free market and using same money (Euro) makes it even more precise.
So what can we fix it for all countries? What physical units you're proposing?
To simplify it we would need to find 10 products, made in concerned countries with same technology and see the value difference in dollars. Granted that dollar exchange is free in these countries, otherwise the black market dollar value could be closer to the truth.
Toyota cars, Nike shoes, coca cola, etc, might be good indicators.

I am not surprised. Italians are quick thinkers, talkers, like to do everything quickly... Workaholics, like the Germans or the Japanese, tend not to be very productive because they often end up spending much more time at work to produce the same amount of wealth (sometimes for the sake of perfectionism, but often just because it's part of the system).

Apparently the Italians, the French and the Belgians know how to maximise their efforts so as to produce a maximum of wealth in a minimum of time, and therefore have more free time to spare. That is especially true with the luxury industry. It doesn't take much more time to create designers clothes and accessories than cheap ones. The main difference is that it requires greater talent and artistic sense, which the Italians undoubtedly have. That's how they end up being more productive in terms of GDP per capita per hour. But as not everybody can be gifted, it is also natural that such countries have a higher unemployment rate.

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"What is the use of living, if it be not to strive for noble causes and to make this muddled world a better place for those who will live in it after we are gone?", Winston Churchill.

I am not surprised. Italians are quick thinkers, talkers, like to do everything quickly... Workaholics, like the Germans or the Japanese, tend not to be very productive because they often end up spending much more time at work to produce the same amount of wealth (sometimes for the sake of perfectionism, but often just because it's part of the system).

Apparently the Italians, the French and the Belgians know how to maximise their efforts so as to produce a maximum of wealth in a minimum of time, and therefore have more free time to spare. That is especially true with the luxury industry. It doesn't take much more time to create designers clothes and accessories than cheap ones. The main difference is that it requires greater talent and artistic sense, which the Italians undoubtedly have. That's how they end up being more productive in terms of GDP per capita per hour. But as not everybody can be gifted, it is also natural that such countries have a higher unemployment rate.

Well, I don't know...We are good in everything that is creative and artistic, but in common works...

I would consider the figures more of a measure of efficiency than productivity. The less you work, the more efficient you will be. European countries have the shortest workdays, so they should trump if you divide output by hours worked. Measurements aside, I don't think any country can exceed the Japanese in productivity.. aren't they slaving away working 70+ hour work weeks over there?

-Japan
AVERAGE HOURS WORKED PER YEAR: 1,889
AVERAGE ANNUAL VACATION DAYS: 17.5

-United states
AVERAGE HOURS WORKED PER YEAR: 1,966
AVERAGE ANNUAL VACATION DAYS: 10.2

You can trust official statistics for Japan. Having worked in Japan for 4 years I am well aware that it is common practice in Japan to do unpaid (and undeclared) overtime, almost every day in some companies. The official number of vacation days is also theoretical because in practice in Japan it is extremely bad manner to take all the vacation days one is allowed to. Many people do not take any day off at all. I have experienced working during several national holidays, with everybody else in the office, and it was not an option to tell the boss that we had the right to stay at home because the law said so.

So yeah, the Japanese are totally overworked, but their GDP has been steadily decreasing for the past 20 years compared to Western countries. Japanese productivity is therefore one of the lowest (probably the lowest) in the developed world. When you see the time it takes to encode a sentence in Japanese compared to Western languages, having to select all the Chinese characters from the list of homonyms, changing the encoding every two words from one of the four writing systems (kanji, hiragana, katakana, romaji) and dealing with half-width and full-width characters... To type exactly the same sentence in English and Japanese takes about three times longer in Japanese. Besides, the Japanese politeness system and their indirect, turn-around-the-pot way of saying things means that to convey the same message a Japanese will usually write 2 or 3 times more words than a Westerner. So overall, cultural bias + encoding taken into account, it takes easily 5 times longer for a Japanese to send a business email that it would to a Westerner. This is possibly one of the biggest blow to their productivity.

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"What is the use of living, if it be not to strive for noble causes and to make this muddled world a better place for those who will live in it after we are gone?", Winston Churchill.

Really great information about the GDP, but we have to consider the "not documented employment". There are people working without contracts and they fall in the so called "grey-economy". And it change the overall statistics.

northern italians are far more productive than germans
but italian political system and south values drop the average which still quite good
you are shocked simply because when you think to italians you think to the southern italian stereotype.

You have no idea what you're talking about...the so called "south" values didn't inhibit the southern Italians who immigrated to the U.S. in the slightest degree. They have had great success in the U.S., particularly in small businesses, where their willingness to take a risk, and their spirit of entrepreneurship have been amply rewarded. The difference is that here they had the opportunity; they always had the drive. Italy failed them; they didn't fail Italy.

Things also change. You should take the long view, and not attribute differences in wealth creation simplistically to some half baked notion of genetics or cultural superiority/inferiority. Barely one hundred years ago, most of the people of the Veneto, among other areas, were illiterate peasants dying of diseases like pellagra. They hemorrhaged emigrants to the northwest of Italy first, then parts of Europe, and then to many countries in Latin America. Did you think all of those Italians in Latin America were from the mezzogiorno? Do you think people would make such sacrifices if everything at home was just hunky-dory? You really should bone up on your Italian history.

And who the heck do you think is working in all of those Italian factories in Torino, or Milano, or in the smaller businesses of Emilia Romagna and Liguria and Toscana, just to name the areas with which I'm most familiar? in my own home region, many of the prosperous small businesses are owned by emigrants from the south. Has it somehow escaped your attention that a good number of the creative people running companies that produce a great deal of Italian wealth have their roots in the south?

You should be ashamed to promote such disgusting stereotypes about your own countrymen. I can tell you from personal experience, from having seen it happen, that should you make such idiotic statements in America, for example, you would not be well received, and I'm not talking only about Italian Americans.

You have no idea what you're talking about...the so called "south" values didn't inhibit the southern Italians who immigrated to the U.S. in the slightest degree. They have had great success in the U.S., particularly in small businesses, where their willingness to take a risk, and their spirit of entrepreneurship have been amply rewarded. The difference is that here they had the opportunity; they always had the drive. Italy failed them; they didn't fail Italy.

Right on the money Angla. I don't think Europeans or Italians in this case are so different to implicate these differences in economic underdevelopment of some regions, and success of others. The best recent case is Ireland, which from one of poorest in Europe became one of the richest in mere 30 years. It is not the people but wrong or inadequate economic and political systems being responsible for not unleashing full potential of many european populations. Sometimes it is just a function of population density, where more populous areas are a magnet for investments and available work force, and ideas, which in return affects faster growth, plus first risers pull talents and emigration from poorer regions, magnifying the effect. It is very visible in US, poor Montana versus rich Washington state and both being mostly same european mix demographics.